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Parental Altruism under Imperfect Information: Theory and Evidence

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Author Info
Ernesto Villanueva

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Abstract

Can we reconcile the predictions of the altruism model of the family with the evidence on parental monetary transfers in the US? This paper provides a new assessment of this question. I expand the altruism model by introducing effort of the child and by relaxing the assumption of perfect information of the parent about the labor market opportunities of the child. First, I solve and simulate a model of altruism and labor supply under imperfect information. Second, I use cross-sectional data to test the following prediction of the model: Are parental transfers especially responsive to the income variations of children who are very attached to the labor market? The results of the analysis suggest that imperfect information accounts for many of the patterns of intergenerational transfers in the US.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 566.

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Date of creation: Sep 2001
Date of revision: Sep 2002
Handle: RePEc:upf:upfgen:566

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Related research
Keywords: Altruism; intergenerational transfers; private information;

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Find related papers by JEL classification:
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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References listed on IDEAS
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ana Fernandes, 2000. "Altruism with Endogenous Labor Supply," Econometric Society World Congress 2000 Contributed Papers 0844, Econometric Society. [Downloadable!]
    Other versions:
  2. Joseph Altonji & Ernesto Villanueva, 2003. "The Marginal Propensity to Spend on Adult Children," Economics Working Papers 667, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  3. repec:bep:eapadv:v:7:y:2007:i:1:p:1488-1488 is not listed on IDEAS
  4. Elin Halvorsen & Thor Olav Thoresen, 2008. "Parents' Desire to Make Equal Inter Vivos Transfers," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. François-Charles Wolff, 2006. "Parental transfers and the labor supply of children," Journal of Population Economics, Springer, vol. 19(4), pages 853-877, October. [Downloadable!] (restricted)
  6. Aysegul Sahin, 2004. "The incentive effects of higher education subsidies on student effort," Staff Reports 192, Federal Reserve Bank of New York. [Downloadable!]
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